Key lawmaker: House will be 'more thoughtful' on Internet sales tax

WASHINGTON -- A key House committee chairman said his panel would take a "more thoughtful" approach to legislation allowing states to force retailers to collect sales taxes on Internet purchases.

His comments signaled that momentum from Monday's easy passage of the bill in the Senate won't lead to quick House action on the controversial issue.

Rep. Bob Goodlatte (R-Va.), who heads the House Judiciary Committee, said he had problems with the proposed Marketplace Fairness Act, and criticized the Senate for bypassing the committee process by taking the bill straight to the floor.

Supporters of the legislation, who have been working years on the issue, said the bill was stalled in the Senate Finance Committee and that it was time to address the problem faced by conventional retailers. Those retailers have argued that they must compete against online merchants who do not have to charge sales tax.

Senate Finance Committee Chairman Max Baucus (D-Mont.) comes from a state that does not have a sales tax, and he opposed the bill.

Of the 10 senators from such states -- including Delaware, New Hampshire and Oregon, as well as Alaska, which has no state sales tax but allows local sales levies -- seven voted against the bill.

Those senators argued it was unfair to force retailers in their states to collect sales taxes for other states, but their opposition couldn't stop the bill. The Senate voted 69-24 to approve it, as 46 Democrats joined with 21 Republicans and two independents.

House supporters of the legislation hoped the strong bipartisan support would push the bill forward in their chamber. They have been trying to counter arguments by some anti-tax advocates that the legislation amounts to a tax increase.

Consumers in states with sales tax are obligated to pay it on their online purchases if the retailer doesn't collect it, but only about 1% of people do.

"Let’s not wait until more businesses go under because of unfair online competition," said Rep. Jackie Speier (D-Hillsborough), one of the main sponsors of the bipartisan House bill. "This is not a new tax, the technology is there, and it is time for the House to act."

Rep. Steve Womack (R-Ark.), the lead sponsor of the bill, said the House needed to pass it to save "local retail business."

But House Republican leaders have deferred to Goodlatte -- and he's got problems with the legislation.

Goodlatte said he understands the concerns of conventional retailers that they are competing with Internet sellers who do not have to collect sales tax.

But he said the bill's process for collecting sales tax for hundreds of different jurisdictions and then remitting payments needed to be simplified.

Goodlatte has also echoed concerns of some conservative opponents of the bill that it could set a precedent for states to collect other taxes, such as income or business-use levies, from people or companies outside their borders.

"I am open to considering legislation concerning this topic, but these issues, along with others, would certainly have to be addressed," Goodlatte said in a statement after the Senate vote.

"The committee will also look at alternatives that could enable states to collect sales tax revenues without opening the door to aggressive state action against out-of-state companies,” he said.

The House Judiciary Committee is likely to hold hearings and consider amendments, said Brian Bieron, senior director of global public policy at EBay Inc., which opposes the legislation in its current form.

The legislation would override a 1992 Supreme Court decision that prevented states from collecting sales taxes from companies with no in-state presence.

California and some other states have begun expanding the definition of an in-state presence so they could begin collecting sales tax from some large online retailers, notably Amazon.com Inc.

The Senate bill would allow states to force larger retailers with no in-state presence to collect sales tax. Companies would be exempt if they have less than $1 million annually in out-of-state online and other so-called remote sales, such as catalog and mail order business.

EBay wants the small-business exemption increased to those with up to $10 million in annual remote sales or to those with fewer than 50 employees.

"The key thing is not the speed but the thoroughness and the openness of the process," Bieron said of House consideration of the legislation. "People are going to have opportunities to raise questions, raise issues."